Recorded Loan Transactions Can’t Be Treated as Unexplained Money: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of ₹1.12 crore made during reassessment proceedings, holding that transactions already recorded in the books of account cannot be taxed as unexplained money under Section 69A merely because the Revenue alleges that they were accommodation entries. The bench of Rahul Chaudhary (Judicial Member) and Vikram Singh Yadav (Accountant Member) partly allowed the appeal filed by Joynest Premises Private Limited for Assessment Year 2020-21 and set aside the addition made by the Assessing Officer. The assessee, a private limited company engaged in real estate development, had originally filed its return declaring a loss of ₹28.55 lakh. The assessment was completed under Section 143(3) accepting the returned income. Subsequently, following a search and seizure operation conducted on the Omkara/Areion Group on 8 December 2021, the Income Tax Department came across a pen drive containing a parallel set of books maintained in a Tally software database named “Personal.” The department contended that statements recorded from key persons of the Areion Group revealed that the “Personal” Tally contained details of unaccounted transactions and accommodation entries. During examination of the seized data, the Department found ledger accounts relating to the assessee company and concluded that loan transactions amounting to ₹1.12 crore represented accommodation entries rather than genuine business transactions. Based on this information, reassessment proceedings were initiated under Section 147. The Assessing Officer eventually treated ₹1.12 crore as unexplained income under Section 69A and completed reassessment under Section 147 read with Section 143(3). The Commissioner of Income Tax (Appeals) upheld both the reassessment and the addition. The assessee challenged the addition by contending that Section 69A was fundamentally inapplicable because the impugned transactions were duly recorded in its books of account and routed through banking channels. The company pointed out that it had advanced loans of ₹72 lakh and ₹40.50 lakh to Areion Fincap Pvt. Ltd. in June 2019, and these transactions were supported by ledger accounts, bank statements, loan confirmations, financial statements and income-tax records. The assessee argued that Section 69A can be invoked only where an assessee is found to be the owner of money, bullion, jewellery or other valuable articles that are not recorded in its books of account. Since the transactions were fully reflected in the books and supported by documentary evidence, the statutory conditions for invoking Section 69A were absent. The company also contended that the Department relied heavily on third-party statements and materials seized from another group without granting an opportunity for cross-examination, thereby violating principles of natural justice. The department defended the addition by relying on the findings of the Assessing Officer and the appellate authority. It argued that although the transactions were recorded in the books as loans, the seized “Personal” Tally data established that they were actually accommodation entries. According to the Department, merely recording a transaction under a false description does not amount to proper recording for the purposes of Section 69A. The Department further submitted that the seized evidence, read with statements recorded during search proceedings, demonstrated that the banking transactions were only a facade used to facilitate accommodation entries involving cash movements. The Tribunal closely examined the modus operandi described in the statements relied upon by the Assessing Officer. The statements indicated that loans were taken through banking channels and corresponding cash transactions were reflected in the parallel “Personal” Tally records. Likewise, repayment of loans through banking channels was allegedly accompanied by cash receipts. However, the Tribunal observed that even if the Revenue’s version was accepted in its entirety, the source of the alleged cash transactions ultimately originated from loan funds transferred through banking channels and duly recorded in the assessee’s books of account. The Bench also noted that the CIT(A) himself had acknowledged that the transactions were recorded in the books, although according to the Revenue they were recorded under an incorrect description as loans instead of accommodation entries. After analysing the statutory language of Section 69A, the Tribunal held that one of the essential conditions for invoking the provision is that the money or valuable article should not be recorded in the books of account maintained by the assessee. In the present case, the transactions involving advancement and repayment of loans aggregating to ₹1.12 crore were admittedly recorded in the books. The Tribunal held that the assessee had not been found to be the owner of any money that was unrecorded in its books. The source of the alleged cash loan was the money advanced through banking channels to Areion Fincap Pvt. Ltd., which was already reflected in the assessee’s accounts. Therefore, the fundamental requirement for applying Section 69A was not satisfied. The ITAT concluded that the provisions of Section 69A were not attracted to the facts of the case. The Bench accordingly deleted the addition of ₹1,12,50,000 made by the Assessing Officer. Since the addition itself was deleted on merits, the Tribunal treated the assessee’s other grounds challenging the validity of the reassessment proceedings as academic and dismissed them without adjudication. The appeal was thus partly allowed. Case Details Case Title: Joynest Premises Private Limited Versus Assistant Commissioner of Income Tax Central Circle 2(4), Mumbai Citation: JURISHOUR-1477-ITA-2026(MUM) Case No.: ITA No.37/Mum/2026 Date: 22.05.2026 Counsel For Appellant: Madhur Agarwal Counsel For Respondent: Manish Ajudiya Click Here To Read Order Read More: Courts Must Not Undermine Arbitration Through Excessive Interference: Supreme Court

Recorded Loan Transactions Can’t Be Treated as Unexplained Money: ITAT

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